Do You Need Critical Illness Cover?

Do You Need Critical Illness Cover?

The insurance industry is always evolving continuously; there are different products, which get introduced from time to time. One product category, which has gained significance over time is Critical Illness Cover. This can be either offered as a single product or as an added extra policy when you take out life cover or health cover. So how does the critical illness cover actually work?

What is critical illness cover?

Critical Illness Cover protects you if you were to suffer from critical illnesses by being insured. The most common illnesses include heart attack, cancer, stroke, kidney failure and paralysis among others. Unlike a traditional life insurance policy, where the insurance provider makes a claim based on the actual expenses incurred on a hospitalisation, the critical illness cover pays out a lump sum to the insured person on the diagnosis of a critical illness covered in the policy. This means that the insured has the freedom to determine how the claim amount can be used as there is no restriction on the expenses. Once the policy has paid out, the policy usually comes to an end.

Which is the best critical illness policy for me?

When taking out Critical Illness Cover there are many factors to think of these:

Amount of cover and cost: As a critical illness policy is taken specifically to pay out on the diagnosis of a critical illness, it is very important that you understand the number of illnesses covered by the policy. Some policies cover as much as 35 illnesses, while some other policies cover as low as 8 critical illnesses. It would be useful to consider any illness, which runs in the family while considering this aspect. It is advisable to take out a policy with maximum coverage and also one that covers illnesses common in your family history. Another part to consider is the options available on the amount of Sum Assured. The Sum Assured option needed should be calculated, albeit approximately, based on the cost of treatment as well as inflation in the treatment costs. Critical illness policies are usually for duration of a year and need to be renewed every year. We advise you clarify from the insurance provider if there is an option to increase the Sum Assured amount on renewal, if needed.

Price: The premium paid for the policy is another important factor. We advise you find an insurance broker who can help find you the best deal. Our brokers can help you with for free.

How important is a critical illness policy?

A critical illness policy is very important for many reasons. First, the financial outflow in case a critical illness is diagnosed is not restricted to a one-time hospitalization expense. There are many other consequences such as the reduced ability to be employed, a change in lifestyle and constant recurring expenses. Further, the extent of expenses is also higher when compared to a less critical disease. Next, if the life insurance cover is insufficient to meet the treatment cost of a critical illness policy, then you will be forced to meet the expenses paying for the investment. This will not only compromise the returns on such investments, but will also hamper the long term financial planning of the individual. Fourth, since a critical illness policy offers a lump sum pay out, it offers higher flexibility when compared to a life insurance policy It should therefore not be the first insurance cover to be purchased. One should first purchase sufficient life cover and term cover before opting for a Critical Illness Cover.

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Benefits of life insurance

There are many benefits when taking out a life insurance policy but here are a few reasons to why you should take out a new policy.

  • Protects your family
  • Receive a cash lump sum
  • High acceptance rates
  • Covers your mortgage

Life Insurance guide

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